Air fares could rise as fuel surcharge returns

MANILA, Philippines — Air fares may rise starting this month as airlines are again allowed to collect fuel surcharge.

The Civil Aeronautics Board (CAB) has approved the reimposition of the passenger fuel surcharge following its suspension last year.

The CAB board has approved a fuel surcharge rate under Level 1 of the passenger fuel surcharge matrix for the months of July and August.

Under the Level 1 of the passenger fuel surcharge matrix, airlines are allowed to impose an increase of P34 to P132 for domestic flights, and P163 to P1,557 for international flights.

“For April to May 2021, the price of jet fuel averaged $71.82 per barrel, with the peso exchange rate of 48.21 to $1 for the same period. This is equivalent to P21.78 per liter, which corresponds to Level 1 of the passenger fuel surcharge matrix,” the CAB said.

The CAB said airlines that wish to impose or collect fuel surcharge for the July to August period must file their application on or before the beginning of the effectivity period, with fuel surcharge rates not exceeding the stated level.

Local and foreign airlines are allowed to collect fuel surcharge rates that are lower than the stated level for the given two-month period if they choose to do so depending on how they want to compete with other carriers.

The fuel surcharge rate dropped to level 0, which means no fuel surcharge will be imposed, starting May last year as jet fuel prices declined.

In August last year, the CAB decided to suspend “until further notice” the passenger fuel surcharge on domestic and international flights.

The suspension was made as oil prices plunged as the COVID-19 pandemic significantly affected demand.

Fuel surcharge is an optional fee imposed and collected by airlines to recover fuel costs and stem losses caused by an upward spike in fuel cost, which is the largest expense by an airline operator.

Based on the matrix, no fuel surcharge will be collected should the two-month price average of jet fuel per liter falls below P21.